Structured settlement | structured settlement payment

A Structured Settlement Payment Vs. Lump Sum Payments

You’ve been in an accident and you’re entitled to a settlement. Traditionally lump sum payments were the only way responsible parties had to pay accident claims. Today, a structured settlement payment opens up a whole new opportunity for injury victims.

A structured settlement payment essentially offers the injured party cash payments via a long-term annuity. This form of compensation covers damages and medical expenses, and for many victims it has numerous advantages over receiving a lump sum payment.

One of the greatest advantages of a structured settlement payment is that the injured party receives a steady income for an agreed upon time frame. This length of time could be limited to a few short years or could last the victim’s lifetime. It all depends on the severity of the accident, the amount of dollars involved and what the particular agreement is.

The circumstances of each case is different and as a result, a structured settlement payment may not be preferred over a lump sum payment in all cases.

A structured settlement payment is regulated for inflation. In other words, the sum of all the payments distributed as part of the settlement would be greater than if the amount was paid in the form of a lump sum.

And because a structured settlement payment would come out of an annuity that was purchased upfront, the party responsible for paying would actually owe less than the sum of the payments.

Being tax free is another advantage to a structured settlement payment. Due to a change to the Federal tax code in the early 1980’s any payments are free of both state and Federal taxes.

The purchased annuity earns the interest which in turn funds the continued payments whereas in the case of a lump sum payment, the injured party would have to invest the money themselves. The disadvantage of a lump sum payment here would be that any interest earned on such investments would be taxed.

For injury victims, a structured settlement payment is also less overwhelming than coming into a lot of money and having to deal with long lost relatives who have come out of the woodwork upon hearing the settlement news.

When settlement money is received in smaller amounts, there are far less worries about being taken advantage of by unscrupulous relatives or people you may have entrusted to invest your money on your behalf.

Overall, a structured settlement payment is simple and easy to manage. You can count on the regular payments and instead of worrying about your investments, you can focus on your recovery or adjusting to any permanent changes in your lifestyle.

The downside however is that with a structured settlement payment you don’t have the luxury of purchasing a new home or being able to pay off expensive medical bills all in one shot. That said, such a payment plan can balance things in your favour over the long term.

structured settlement payment news

Rethinking Structured Settlements
Structured settlements have been around for a long time, our site has been a resource for those looking for information in different states and during different periods. New legislation may take some of the profiteering out of selling structured settlements and along with governmental leadership there are a few dos and don'ts that everyone should know.

Note: This is just the first half of our suggestions for Structured Settlement reform, more to come later this week.

1. Introducing a government assisted educational track for tort victims might help them decide on a long term plan instead of going directly to settlement payments.


2. New laws creating stricter regulations on advertising structured settlements, this could go hand in hand with educational options


3. When it comes down to it we might just need some better leadership from the Better leadership from the NASP (National Association of Settlement Purchasers) who are sponsoring all of this confusion and harmful profiteering, there is certainly room for education and profit in the industry and a wise company leader could step up to assume that role. this might also tie into voluntary educational assistance programs or semi-settlements which offer a lump sum along with a partial payment (so settlers aren't completely helpless if they spend their money)


4. Development of a NASP (national association of settlement purchasers) website that could help to inform and update the public. Right now there is nothing above the fold on Google for the search "NASP" that even relates to structured settlements (NASP is a very common acronym).

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A Structured Settlement May Not Be the Right Answer
Structured settlements are great at providing long term financial security to personal injury victims. Structured agreements provide predictable payments that are received tax free. Usually an agreed upon structured settlement payment plan is well thought out and it does not makes sense to change it. However in some cases a financial or family emergency can strains the financial resources of the injured party and in those moments some people choose to sell structured settlement payments for cash.

In emergencies the structured nature of settlement payments becomes restrictive and does not accommodate the flexibility needed to address major financial emergencies. If you find yourself in this position it is wise to seek the help of professionals including structured settlement brokers, lawyers, and financial advisors. You will want to learn as much as you can and also to compare the offers of several companies before you make any decision. Remember you are in control, make an informed decision that is right for you....(more)

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